An important update to the Motability scheme: What you need to know

At Hills, we work closely with Motability customers everyday, so we wanted to share an update on some of changes coming to the scheme.

From 1^st July 2026, Motability will be introducing a number of changes for new orders placed on or after that date. These changes follow Government tax updates and are designed to help keep the scheme sustainable for the long term.

We know that change can raise questions, so below we’ve outlined what’s changing, what’s staying the same and what this could mean for you.

What’s changing?

Taxes on most new leases

From 1^st July 2026, VAT and Insurance Premium Tax will apply to most new leases, this includes the Advanced Payment and some in-life costs, such as, excess mileage, early termination fees, asset recovery charges and the fair usage charges.

Mileage allowances

For new leases from 1^st July 2026,

• A new 3 year lease, will include a milage allowance of 30,000 miles
• A new 5-year WAV lease, will include a mileage allowance of 50,000 miles

Motability has confirmed if you need to exceed this mileage allowance, extra mileage can be paid for and support may be available in exceptional circumstances.

Tyre replacement

New leases will still include replacement tyres, but within a fair-use limit.

• Three-year lease: up to 6 tyres, with up to 4 for damage
• Five-year lease: up to 10 tyres, with up to 6 for damage

EU Breakdown Cover

If you travel abroad in your Motability vehicle, there will be a change here too. For new orders after 1^st July 2026:

• You’ll need a VE103 Certificate before travelling
• An admin fee for the VE103 Certificate applies to all new orders
• You can still obtain this from the RAC

What’s not changing

Just as importantly, a lot of the core parts of the Motability Scheme remain unchanged.

Your lease will still include:

• Insurance for up to 3 drivers
• Servicing and maintenance
• Breakdown cover
• Dedicated support from the Hills & Motability teams

If you already have an active lease, nothing is changing right now. These updates only apply to applications made on or after 1^st July 2026.

How will the changes effect me?

If you apply and receive your vehicle before 1^st July 2026, you’ll be on the current Motability Scheme terms and everything will stay as it is today.

If you apply before the 1^st July but receive your vehicle on or after the 1^st of July, your Advanced Payment will be locked in and it won’t be increase with the VAT changes. You will also still receive a 20,000 mile per year mileage allowance and 8 tyre replacements for a 3 year lease. However, some of the new scheme terms will apply. Such as, VAT on in-life costs and an increased 6p per mile excess mileage charge.

If you apply on or after 1^st July 2026, the new Scheme terms will apply.

How can Hills help me with these changes?

At Hills, our dedicated Motability specialists work with customers every day, so we understand how important it is to get the right advice, especially when things are changing.

We’re here to help you navigate these changes. Our team are on hand to:

• Talk you through exactly what applies to you, based on your current lease and timings
• Explain the differences between ordering a vehicle before or after 1^st July 2026
• Help you understand costs, options and availability
• Support you in choosing the right vehicle for your needs

Speak to our Motability Team

You can contact our Motability Team in person, online or by phone.

Click here to contact our Motability Team